Deal or no deal? What M&A dealmakers need to know about the upcoming merger reforms

Australia’s merger clearance system is set for a significant reboot in a little over 18 months’ time, as the Federal Government seeks to “modernise” the system by making it “faster, stronger, simpler, more targeted and transparent”. Time will tell whether the slated reforms will lead to more competitive markets and cheaper prices for Australian consumers.

One thing is clear though – the reforms will see a quantum shift in the regulatory landscape for M&A deals in Australia. Dealmakers shouldn’t delay getting up to speed on the changes. Whilst the new system doesn’t kick off until 1 Jan 2026, it has the potential to impact current deals.

Here’s what you need to know:

1. New mandatory, suspensory merger clearance system: The current voluntary notification and merger authorisation system will be replaced by a more structured, formal mandatory clearance system for all mergers above certain thresholds. Mergers will effectively be prevented from proceeding without clearance by the ACCC (or the Australian Competition Tribunal). The clearance system will continue to be run by the ACCC as the first instance decision maker so dealmakers won’t have the option of bypassing the ACCC. With the uptick in the ACCC’s workload, the regulator will be growing its team. The respected economist, Dr Philip Williams, is also set to join the ACCC as a fifth Commissioner to deepen the regulator’s economic credentials.
2. Legal test updated: The substantive merger test in the Competition and Consumer Act 2010 (Cth) will be broadened. Creeping acquisitions of the acquirer/target over the last three years will be able to be taken into account, and consideration will be had as to whether a merger “creates, strengthens or entrenches a position of substantial power in any market”. This means the ACCC will be expressly empowered to assess the impact of a merger and other serial acquisitions on overall market structure, as well as whether there will be an entrenchment of a dominant position. Additional economic principles will also be added to the merger test. All this means deals in concentrated industries will be subject to greater regulatory scrutiny and may be harder to clear once the new system takes effect. In fact, any deals done over the next 18 months that have not been disclosed to the ACCC may end up being scrutinised by the ACCC come 1 Jan 2026 so this needs to be factored into M&A deals being done right now.
3. ACCC will have to clear a deal unless it has the “reasonable belief” it will substantially lessen competition: The ACCC failed to convince the Government that the onus of proof needed to be shifted from the ACCC to merger parties, a move that would have required merger parties to positively prove to the ACCC that their deal was not likely to substantially lessen competition. This means that in the new system, the ACCC will still bear the onus and must allow a merger to proceed unless it has the “reasonable belief” that the merger has the effect or likely effect of substantially lessening competition in any market. This “reasonable belief” threshold is an administrative one rather than a civil one as is currently the case.
4. Public benefits clearance option will remain: Merger parties can continue to use the substantial public benefits test, but only if the ACCC doesn’t clear a merger on competition grounds.
5. Clearer timelines for clearance, plus a fast-track option for pro-competitive mergers: Timelines are yet to be settled, but it’s currently slated that the ACCC will have to assess all notified mergers within 30 working days (Phase 1) and decide whether to approve them or refer them to a more in-depth (Phase 2) review, which needs to be completed within a further 90 working days. Whilst the ACCC will no doubt be able to “stop and start” the clock, mergers will effectively be deemed to be approved if the ACCC fails to make a decision within 120 working days. There will however be an option for fast-track determinations to be made by the ACCC in as little as 15 working days for mergers that don’t raise any competition concerns.
6. Notified mergers will all be public: no confidential approval options will remain and once notified, mergers will go on the ACCC’s public register (via the ACCC website). This will increase transparency and accountability for the ACCC but won’t be palatable for all deals.
7. Significant filing fees introduced: there will be a user-pays system which will see merger parties paying between $50,000 – $100,000 per application, scaled to reflect deal complexity and risk. Currently there are no fees payable for informal clearances, as opposed to $25,000 for merger authorisations. A fee exemption is to be available for small business. Treasury will consult on filing fees this year.
8. Notification thresholds: Only deals above certain, yet to be decided, materiality thresholds will trigger the compulsory notification requirement. All mergers by the acquirer or target in the three year period before a deal will be aggregated to determine whether a merger meets the threshold. Below-threshold deals will still be able to be put to the ACCC for clearance. The ACCC will not have “call-in” in powers for below-threshold deals as was initially slated.
    The reach of the new system hangs on the notification thresholds, but Treasury is still consulting on them. The Government has indicated that they will be based on international best practice and set at a level to ensure that the ACCC sees mergers “that matter”. It seems likely they will be based on a combination of monetary value (turnover of parties, profitability, deal value) and market share. The ACCC has previously suggested a deal threshold of companies with a turnover of $400M or a global transaction value of $35M so we wait to see where the Government lands with this.
9. Appeal rights clearer but more limited: merger parties will have more streamlined rights to appeal an ACCC determination to the Australian Competition Tribunal for a limited merits review. However, there will be no appeal rights to the Federal Court for a merits review as is currently the case.
10. Timing of reforms: The reforms are set to commence on 1 January 2026, but this is subject to further consultation on certain key issues over the course of 2024 (like thresholds and clearance timeframes) and the passage of legislation through Federal Parliament. The exposure draft legislation is expected soon.

Key takeaways

• The Government says the new system will be “fit-for-purpose”, providing greater clarity and certainty for businesses, and better safeguards and competition for consumers. Similar mandatory merger clearance regimes apply in most other developed economies so Australia is falling into line with these jurisdictions. We believe New Zealand will follow Australia’s lead in due course.
• The ACCC has welcomed the slated reforms, saying the new system will stop deals slipping under the radar or being misrepresented by the parties who they say often approach the ACCC late in the piece, if at all, and then at times with inadequate, highly curated information.
• As against this though, the business community is seeing a less flexible merger clearance system with more red tape and higher fees which will mean deals will be more time and resource intensive. The fear is this will put deals at risk and stifle M&A activity in Australia.
• Whilst there are many key details about the new system that are yet to be settled, it’s clear the proposed reforms – assuming they are implemented – will fundamentally reboot Australia’s merger clearance system and change the way deals are done. Most deals will require a public ACCC process so there will be increased certainty for merger parties in this sense, but the new system will have a big knock-on in terms of deal costs, regulatory filings and timelines. Deals in concentrated industries also look set to be harder to clear, as they are in other jurisdictions.
• Parties may be tempted to roll the dice and rush through deals without consulting the ACCC before the new regime takes effect in January 2026. Care is required with this approach. The ACCC can use its powers to investigate mergers that it learns about on the grapevine and it can also take legal action to prevent or unwind a deal if it has real competition concerns. The ACCC isn’t shying away from taking a robust approach with interrogating mergers, as well as deals done previously by targets that have not been put to the ACCC. Case in point is the recent Woolworths-PETstock clearance in December 2023 where the ACCC spent close to 12 months closely interrogating not only the Woolworths’ deal, but also past deals of the target, which resulted in divestiture undertakings being given by both parties to address the regulator’s concerns.
• Changes to the merger test around creeping acquisitions and the three year “look back” for deals also means dealmakers need to think about how deals they are doing right now may impact post-1 January 2026 deals. Deals that don’t need to be notified right now may end up being scrutinised by the ACCC once the new system takes effect, so dealmakers need to play the “long game” and carefully think about the deals they do over the next 18 months.
• Time will tell if the new system ushers in a more streamlined, uniform and transparent merger clearance process. In the meantime, we await the release of the exposure draft bill in the coming months and further discussion in 2024/205 about some of the key details of the system (like the all-important notification thresholds and timeframes).

Reference: Addisons -  Deal or no deal? What M&A dealmakers need to know about the upcoming merger reforms - Addisons